Genetically Modified Food and International Trade: The Case of India, Bangladesh, Indonesia, and the Philippines

Genetically modified (GM) food crops have the potential to raise agricultural productivity in Asian countries, but they are also associated with the risk of market access losses in sensitive importing countries. We study the potential effects of introducing GM food crops in Bangladesh, India, Indonesia, and the Philippines in the presence of trade-related regulations of GM food in major importers. We focus on GM field crops (rice, wheat, maize, soybeans, and cotton) resistant to biotic and abiotic stresses, such as drought-resistant rice, and use a multi-country, multi-sector computable general equilibrium model. We build on previous international simulation models by improving the representation of the productivity shocks associated with GM crops, and by using an improved representation of the world market, accounting for the effects of GM food labeling policies in major importers and the possibility of segregation for non-GM products going toward sensitive importing countries. The results of our simulations first show that the gains associated with the adoption of GM food crops largely exceed any type of potential trade losses these countries may incur. Adopting GM crops also allows net importing countries to greatly reduce their imports. Overall, we find that GM rice is bound to be the most advantageous crop for the four countries. Second, we find that segregation of non-GM crops can help reduce any potential trade loss for GM adopters, such as India, that want to keep export opportunities in sensitive countries, even with a 5 percent segregation cost. Lastly, we find that the opportunity cost of segregation is much larger for sensitive importing countries than for countries adopting new GM crops, which suggests that sensitive importers will have the incentive to invest in separate non-GM marketing channels if exporting countries like India decide to adopt GM food crops.